The Andhra Pradesh government recently passed a Bill that mandates 75 per cent of jobs to be reserved for locals. The AP Employment of Local Candidates in Industries and Factories Bill is applicable to industries, factories, joint ventures and projects taken up under public-private partnerships. It is the first state in the country to implement such a law.

This move is significant as it virtually covers the whole private sector. The Bill has been received with mixed feelings from both within and outside the state. Some have welcomed it, while others have raised doubts about its constitutional validity and sustainability.

The Bill raises many questions. Is this protectionism a sign of growing insecurity in the world economy? Does it violate the constitutional provisions of equality of opportunity? Is such a move sustainable? This protectionist Bill has to be interpreted keeping in mind global and national developments in both the economic and political spheres.

Putting the issue in context

The reservation debate is not new. Caste-based reservation has been one of the most bitterly contested issues since independence. Recently, the Centre introduced a 10 per cent quota for the economically weaker sections of society.

The preference for local candidates has repeatedly made headlines in the past. In fact, the Shiv Sena made its political entry by raising the issue in the 1960s. The attacks on north Indians, especially from Uttar Pradesh and Bihar in Maharashtra, or the attacks on north Indians in Bengaluru after the death of actor Rajkumar are some prime examples.

Andhra Pradesh has taken a lead in providing local reservation to its subjects. However, there have been similar demands in support of such a provision in states such as Gujarat, Madhya Pradesh, Karnataka and Maharashtra. There is resentment against the monopolisation of employment opportunities. Regional imbalances in resources and capital investment are adding fuel to such demands.

The triggering factors

It is interesting to note that undivided Andhra Pradesh was one of the few states that benefited from the booming IT industry. There has been a significant migration of people from Andhra Pradesh to the western world, especially Silicon Valley. It is evident from the fact that between 2010 and 2017, the number of native Telugu speakers in the US surged by 86 per cent - the largest uptick in a foreign language-speaking group, according to the Center for Immigration Studies (CIS).

The world economy went into a tailspin after December 2007. It also affected the Indian economy to some extent, though not as badly as the western world. The slowdown has now turned into a recession, leading to slower growth rates, rising unemployment and insecurities the world over. The US, which was the biggest defender of free market and liberalisation, is now becoming protectionist. On the other hand, China, the flagbearer of socialism, is the biggest beneficiary and defender of free market and liberalisation.

The bipolar world of past has given rise to a multipolar world today. In this change, some have benefited while many have lost their traditional superiority. Trade wars are dominating the news cycle. The US’ goods trade deficit with China was a whopping $419.2 billion in 2018. Similarly, India’s trade deficit with China climbed from $51.72 billion in 2017 to $57.86 billion in 2018.

The loss of economic opportunities and employment in the US due to the shift of companies to China and India has forced it to take some tough policy decisions. One key decision is regarding the H-1B visa. It has badly affected Indian IT industry. The US has imposed visa restrictions as workers from developing countries are replacing labour in the western world. This issue has also had a major impact on regional politics in India.

Andhra Pradesh lost significant revenue due to the bifurcation of the state in 2014. Hyderabad, a lucrative source of revenue, became the capital of Telangana. This has weakened the Andhra Pradesh economy. In addition to this, the Indian economy is going through a crisis. The National Sample Survey Office (NSSO) pegged the unemployment rate in 2017-18 at 6.1 per cent, a 45-year high. Some sectors such as agriculture, banking, telecom, real estate, aviation and automobiles are going tough times. New technologies such as AI are going to affect us in a big way on the jobs front. The cumulative and combined effect of these will be huge on the economy.

All these factors are likely to trigger more political and economic unrest in the country. State governments are likely to respond to this by becoming more protectionist in future.

In Andhra Pradesh’s case, former chief minister N. Chandrababu Naidu tried hard to negotiate with the Centre to gain special status for the state, but his efforts did not materialise. This failure to bring financial resources to the new state and his inability to understand the mood of the people led to his poll debacle.

Naidu was pitching for a world-class capital city, while his rival promised reservation to locals after reading the pulse of the people. This worked very well for Y.S. Jaganmohan Reddy, who swept the state virtually leaving no space for the Opposition in the Assembly.

Does the Bill violate the Constitution?

There have been some apprehensions about the constitutional validity of the Bill. Article 16 of the Constitution promises equality of opportunities to citizens. However, it is only applicable in respect to public employment of state or aided establishments. The Constitution, though various articles and provisions, maintain that there should not be any discrimination on the basis of religion, race, caste, sex, descent, place of birth or residence in respect to employment. The Constitution guarantees dignity, protection and livelihood to the people. The reservation Bill reserving 75 per cent of jobs to locals does not violate the constitutional provisions. The Bill still leaves a significant portion of jobs for outsiders and migrants, thereby avoiding any crisis. It merely provides protection to the subjects following democratic procedures. The Bill empowers the state and brings the private sector under its coverage to fulfil the constitutional mandate towards its subjects.

Karnataka had introduced a similar proposal in 2016, reserving 100 per cent of jobs to locals. It was vetoed down by the legal department as it was against the very spirit of equality of opportunity and constitutional legality.

Challenges going forward

The Bill is path-breaking in many ways as it makes the private sector directly accountable to state subjects. In other words, decisions about recruitment policies, capacity building and skill enhancement have to be collectively shared and developed by both the private and public sectors. The onus will be on the private sector to train locals and enhance their skills.

One major critique of the Bill is its sustainability. In a globalised world where physical and cultural barriers between countries and regions are collapsing, the proposed Bill goes against the prevailing logic. Andhra Pradesh has already lost considerable revenue and infrastructure after bifurcation. It is not going to be easy for the incumbent regime to attract private capital to develop infrastructure. It is important for the state to remain a safe haven for investment in order to have a competitive advantage over rival states such as Karnataka and Tamil Nadu.

Moreover, this is not going to be an easy ride as there may be many areas of confrontation between the state and market forces. The law has to be coordinated at every level and there may be a need to alter and modify many other laws or bring new associated laws. The mere passage of the Bill is not going to help as there may be other areas where this vision needs to be manifested. The Bill may have come out of electoral populism, but it needs a proper direction to be meaningful and sustainable.

The state has to implement it in such a way that there is balanced development and distribution of opportunities across regions. Otherwise it may give rise to dissent within.

Prashant Kumar Kain is an assistant professor at EFL University, Hyderabad. The views expressed here are personal.